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fuboTV: A Unique Offering but Too Many Unknowns Keep This Analyst Sidelined
Stock Analysis & Ideas

fuboTV: A Unique Offering but Too Many Unknowns Keep This Analyst Sidelined

The TV advertising industry is in the early stages of a big transformation; namely, moving ad spend away from linear TV to CTV (connected TV).

With its potent mix of CTV and online sports betting (OSB), Stephens analyst Nicholas Zangler thinks fuboTV (FUBO) is one of “few vMVPDs (virtual multi-channel video programming distributor) providing consumers with a cable replacement product capable of generating meaningful CTV ad revenue.”

By leveraging its current subscriber base, the sports-focused streamer has launched an online sportsbook which “uniquely syncs” with the streaming service, providing users with what Zangler calls a “holistic and differentiated experience.”

And that subscriber base has been growing at a rapid clip – from 316,000 in 2019 prior to the pandemic to 1.130 million by the end of last year. And there’s plenty of potential for further expansion.

As more households are expected to move away from linear TV to CTV, over time, Zangler thinks FUBO will be able to grow the U.S. subscriber base from 1.130 million to 2.5 million. Going by the assumption all states legalize OSB, Zangler estimates 35% of fuboTV subscribers will “regularly participate” in online sports gambling and make use of Fubo Sportsbook.

And it’s back to the ad spend potential here. Given the specialized sports-focused subscriber base using Fanview and Sportsbook, Zangler expects “unique/differentiated ad inventory and sponsorship opportunities to arise.” Moreover, in 2021, repeat advertiser spend rose by 70% while FUBO’s top 5 advertiser clients’ spend increased by 3x to 10x year-over-year, suggesting “ongoing organic growth potential.”

The problem for FUBO, however, is that even with all those positive data points, the EBITDA losses “continue to mount.” Here, Zangler is also sanguine, noting the company has “reached a level of scale that may permit for more aggressive advertising ARPU expansion.”

That said, with so much competition in the vMVPD space plus subscriber related expenses and no “foreseeable profitability potential” for subscription revenue, the analyst stops short of getting fully behind the company.

“We see potential for significant revenue growth and profitability, but with so many unknowns we await more clarity, particularly within the sports betting opportunity,” Zangler summed up.

Accordingly, Zangler rates FUBO shares an Equal-Weight (i.e. Hold) along with a $6 price target. Still, there’s upside potential of 50% from current levels. (To watch Zangler’s track record, click here)

Overall, analysts are split down the middle on this one; based on 6 Buys and Holds, each, the stock claims a Moderate Buy consensus rating. However, most agree the shares are undervalued; going by the $13.39 average target, the stock will rise ~234% over the next 12 months. (See FUBO stock forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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